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Businesses cannot require that employees use direct deposit for paychecks. Authorization for direct deposit is cancelled upon an employee's termination.
Cannot Require Direct Deposit
A business cannot require that its employees use direct deposit for the payment of their paychecks.
Use of a direct deposit system requires that an employee have a checking or savings account, and having such an account is not a proper basis for conditioning employment.
Automatic Cancellation Upon Termination
When a person's employment is terminated, voluntarily or involuntarily, by law the employee's authorization to directly deposit their paycheck is deemed cancelled.
Final Payment
Effective January 1, 2006, employers can now use direct deposit to pay an employee their final paycheck (if the other requirements for using direct deposit and for making the final pay are ment). (Labor Code §§ 213.)/p>
It is important to remember that the employee may often be owed more than just their final regular pay, and that the employee must also be paid for all accrued vacation.
Key Section is Labor Code § 213(d):
Labor Code § 212:
(a) No person, or agent or officer thereof, shall issue in payment of wages due, or to become due, or as an advance on wages to be earned:(1) Any order, check, draft, note, memorandum, or other acknowledgment of indebtedness, unless it is negotiable and payable in cash, on demand, without discount, at some established place of business in the state, the name and address of which must appear on the instrument, and at the time of its issuance and for a reasonable time thereafter, which must be at least 30 days, the maker or drawer has sufficient funds in, or credit, arrangement, or understanding with the drawee for its payment.(b) Where an instrument mentioned in subdivision (a) is protested or dishonored, the notice or memorandum of protest or dishonor is admissible as proof of presentation, nonpayment and protest and is presumptive evidence of knowledge of insufficiency of funds or credit with the drawee.
(2) Any scrip, coupon, cards, or other thing redeemable, in merchandise or purporting to be payable or redeemable otherwise than in money.
(c) Notwithstanding paragraph (1) of subdivision (a), if the drawee is a bank, the bank's address need not appear on the instrument and, in that case, the instrument shall be negotiable and payable in cash, on demand, without discount, at any place of business of the drawee chosen by the person entitled to enforce the instrument.
Labor Code § 213:
Nothing contained in Section 212 shall:
(a) Prohibit an employer from guaranteeing the payment of bills incurred by an employee for the necessaries of life or for the tools and implements used by the employee in the performance of his duties.
(b) Apply to counties, municipal corporations, quasi municipal corporations or school districts.
(c) Apply to students of nonprofit schools, colleges, universities, and other nonprofit educational institutions.
(d) Prohibit an employer from depositing wages due or to become due or an advance on wages to be earned in an account in any bank, savings and loan association, or credit union of the employee's choice with a place of business located in this state, provided that the employee has voluntarily authorized that deposit. If an employer discharges an employee or the employee quits, the employer may pay the wages earned and unpaid at the time the employee is discharged or quits by making a deposit authorized pursuant to this subdivision, provided that the employer complies with the provisions of this article relating to the payment of wages upon termination or quitting of employment.